Heading into its third quarter earnings report on Tuesday, shares in PayPal Holdings have been on a roll, as Wall Street embraces the strategy of new Chief Executive Alex Chriss. Management's preliminary 2025 outlook for PayPal stock will be key, though, with some analysts wondering whether this year's catalysts will continue.
PayPal will report Q3 results before the market open on Oct. 29. PayPal stock has advanced 33% in 2024, with much of the gain coming after its Q2 earnings report.
For Q3, analysts predict EPS of $1.07, down 17% from a year earlier. Revenue is expected to climb 6% to $7.88 billion. Total payment volume from merchant transactions is expected to be $422.5 billion.
Analysts will be looking for early 2025 commentary on revenue upside from new products, such as Fastlane, and the outlook for transaction margins.
PayPal Stock: 'Fastlane' Upside?
"From here we believe that the road becomes more difficult as PayPal seeks to boost branded volume growth and Venmo monetization, efforts we see challenged by strong wallet competition and consumer inertia," said Andrew Jeffrey, a William Blair analyst, in a report.
Morgan Stanley analyst James Faucette in a report said investors fret that gross profit growth will be challenged "exiting 2024 and in 2025."
In Q2, transaction gross profit rose 6.5% to $3.2 billion, topping estimates by 1%.
Some analysts have been upbeat on the potential of PayPal's new "Fastlane" guest checkout. Fastlane doesn't require users to create PayPal accounts.
PayPal in August announced Fastlane partnerships with Adyen and Fiserv.
Jefferies analyst Trevor Williams said in a report: "Our concern is the stock has run on hoped-for contributions in 2025 (primarily Fastlane) that we believe are unlikely to be impactful in the next 12 months, while transaction margin upside in 2024 has been driven by dynamics either unlikely to contribute similarly in 2025 or flip to a headwind (float income)."
PayPal Stock: Braintree Business
San Jose, Calif.-based PayPal has evolved from an online checkout site to a mobile shopping and person-to-person payments site.
Some analysts have cited its Braintree unit as one area to watch next year amid price hikes. A peer-to-peer payment service, Braintree's Venmo lets friends or families transfer money to each other. It competes with Cash app services from Square-parent Block and others.
PayPal stock holds a Relative Strength Rating of 92 out of a best-possible 99, according to IBD Stock Check-up.
Bernstein Research analyst Harshita Rawat on Oct. 10 downgraded PayPal stock to market perform.
"The stock path appears to be more uncertain from these levels due to the push/pull dynamics around intense competitive pressures on the cash-cow (check-out) button on one hand, and tailwinds from buybacks/operating expense cuts on the other hand."
Rawat added: "We see some risks of negative revisions (on gross profit) into 2025 because of exposure to interest rates."
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